Feds Seeking Fact Admissions In False Claims Cases

The False Claims Act settlement process typically involves two steps: agreement on the principal terms, and negotiating the written settlement agreement. The settlement itself includes a “covered conduct” recitation, and typically that conduct has been denied. DOJ has long agreed to provisions according to which the company both denies the allegations and resolves the matter.

That may be changing. In a practice ushered in with U.S. Attorney Preet Bharara’s term, the U.S. Attorney’s Office for the Southern District of New York is not only requiring companies and individuals to admit their role in the alleged fraud as part of the price of settling an FCA case, but it’s also emphasizing those admissions in press releases about the settlements. This practice of obtaining admissions of fact in FCA settlements may spread if DOJ suggests to the 92 other U.S. Attorney’s offices around the country that it will not approve settlements without such admissions.

Admitted facts, of course, lead to potential collateral consequences beyond resolution of FCA claims with the government. These include a possible effect on litigation by third parties, state attorney general actions, administrative proceedings (such as exclusion, suspension or debarment), insurance coverage disputes and reputational harm. Individual defendants also risk additional collateral consequences, including loss of employment and potential loss of future employment. Given these potential consequences, when faced with DOJ demands for admission of facts, companies should carefully consider whether such resolution is worth the price.